1) Why did you select accounting as your profession?

Well, I was quite good in accounting throughout but in my masters, when I got
distinction I decided to adopt this field as a profession.
2) Do you have any professional experience of this field?
Yes, I have worked as an accountant at two different places.
3) Did you use accounting applications at your previous companies or prefer working
manually??
Yes, I have used Advanced Business Solutions and AME Accounting Software in my
previous jobs.
4) Can you name any other accounting application?
Yes, I am familiar with CGram Software, Financial Force, Microsoft Accounting
Professional, Microsoft Dynamics AX and Microsoft Small Business Financials.
5) Which accounting application you prefer most and why?
I think all are good though but Microsoft Accounting Professional is best because it
offers reliable and fast processing of accounting transactions that saves time and
increases proficiency.
6) What is the abbreviation for the accounting terms debit and credit?
Debit abbreviation is “dr” and credit abbreviation is “cr”.
7) How many types of business transactions are there in accounting?
There are two types of transactions in accounting i.e. revenue and capital.
8) What is balance sheet?
It is a statement that states all the liabilities and assets of the company at certain point.
9) Have you ever heard about TDS, what it is?
Yes, TDS abbreviates Tax Deduction at Source.
10) In balance sheet, where do you show TDS?
It is shown on the assets section, right after the head current asset.
11) Do you have any idea about Service Tax or Excise?
It is a kind of hidden tax that is included in the service provided by the service provider
and paid by the service receiver.
12) Do you think there is any difference between inactive and dormant accounts?
Yes, both are different terms in accounting. Inactive accounts means that accounts have
been closed and will not be used in future as well. While, dormant accounts are those
that are not functional today but may be used in future.
13) What is tally accounting?
It is the software used for accounting in small business and shops for managing routine
accounting transactions.
14) How can you define departmental accounting?
It is a type of accounting in which separate account is created for departments. It is
managed separately as well as shown independently in the balance sheet.
15) Define fictitious assets?
These are the assets that cannot be shown or touch. Fictitious assets can only be felt
such as good will, rights etc.
16) By saying, perpetual or periodic inventory system; what do we mean?
In the first one i.e. the perpetual inventory system, the accounts are adjusted on
continual basis. In the periodic inventory system, the accounts are adjusted periodically.
17) In accounting, how do you define premises?
Premises refer to fixed assets that are shown in the balance sheet.
18) In accounting, VAT abbreviates what?
VAT means Value Added Tax.
19) Do you possess any knowledge about accounting standards?
Yes, as per my knowledge there are total 33 accounting standards published so far by
ICAI. The purpose of these standards is to implement same policies and practices in any
country.
20) What is ICAI?
It is the abbreviation of Institute of Chartered Accountants in India.

21) How can you explain the basic accounting equation?

We know that accounting is all about assets, liabilities and capital. Therefore, the
accounting equation is:
Assets = Liabilities + Owners Equity.
22) Define Executive accounting?
It is a type of accounting that is specifically designed for the business that offers services
to users.
23) Define Public accounting?
Public accounting offers audits and CPAs to review company financial records to
ensure accountability. It is for general public.
24) What is a CPA?
CPA stands for Certified Public Accountant. To become a CPA, one should have to do
many other qualifications as well. It is a qualification with 150 hour requirement; it
means that one should complete 150 credit hours at any accredited university.
25) What do you think is bank reconciliation statement?
A reconciliation statement is prepared when the passbook balance differs from the
cashbook balance.
26) Differentiate Public and Private Accounting?
Public accounting is a type of accounting that is done by one company for another
company. Private accounting is done for your own company.
27) What is project implementation?
Project implementation involves six steps in total such as:

• Identify Need
• Generate and Screen Ideas

• Conduct Feasible Study

• Develop the Project

• Implement the Project

• Control the Project

28) Do you think Accounting Standards are mandatory and why?
Yes, I do believe that accounting standards play a very important role to prepare good
quality and accurate financial reports. It ensures reliability and relevance in financial
reports.
29) Can you name different branches of accounting?
There are three branches of accounting named as “Financial Accounting”,
“Management Accounting” and “Cost Accounting”.
30) Differentiate Accounting and Auditing?
Accounting is all about recording daily business activities while auditing is the
checking that whether all these events have been noted down correctly or not.
31) Define dual aspect term in accounting?
As the name implies, the dual aspect concept states that every transaction has two sides.
For example, when you buy something, you give the cash and get the thing. Similarly,
when you sale something, you lose the thing and gets the money. So this getting and
losing is basically two aspects of every transaction.
32) What do we mean by purchase return in accounting?
It is the term introduced in the records for every defective or unsatisfactory good
returned back to its supplier.
33) Define the term material facts in accounting?
Material facts are the bills or any document that becomes the base of every account
book. It means that all those documents, on which account book is prepared, are called
material facts.
34) Have you ever prepared MIS reports and what are these?
Yes, I have prepared few MIS reports during my previous jobs. MIS reports are created
to identify the efficiency of any department of a company.
35) Define company’s payable cycle?
It is the time required by the company to pay all its account payables.
36) Define retail banking?
It is a type of banking that involves a retail client. These clients are the normal people
and not any organizational customers.
37) How much mathematics knowledge is necessary or required in accounting?
Not much knowledge but basic mathematical background is required in accounting for
operations like addition, subtraction, multiplication and division.
38) Define bills receivable?
All types of exchange bills, bonds and other securities owned by a merchant that is
payable to him are said as bills receivable.
39) Define depreciation and its types?
By depreciation we mean that a value of an asset is decreasing as it is in use. It has two
types such as “Straight Line Method” and “Written Down Value Method”.
40) Differentiate between consignor and consignee?
Consigner is the owner of the goods or you can say he is the person who delivers the
goods to the consignee. The consignee is the person who receives the goods.
41) Define balancing in accounting?
Balancing means to equate both sides of the T-account i.e. the debit and credit sides of a
T-account must be equal/balanced.
42) How much statistics knowledge is necessary or required in accounting?
You must be very good at statistics if you want to do well in accounting. Otherwise,
with minimum knowledge you cannot manage your day to day transactions effectively
in accounting.
43) Define Scrap value in accounting?
It is the residual value of an asset. The residual value is the value that any asset holds
after its estimated life time.
44) Define Marginal Cost?
Suppose you have to produce an additional unit of output. The estimated cost of
additional inputs to produce that output is actually the marginal cost.
45) Define Partitioning in accounting?
It is a kind of groups made on the basis of same responses by a system.
46) Differentiate between provision and reserve?
Provisions are the liabilities or the anticipated items such as depreciation. You can say
provisions are expenses. Reserves are the profits of any company and a part of that
profit is placed back to the business to keep it sustainable in tough times of a company.
47) Define Offset accounting?
Offset accounting is one that decreases the net amount of another account to create a net
balance.
48) Define overhead in terms of accounting?
It is the indirect expenditure of a company such as salaries, rent dues etc.
49) Define trade bills?
We know that all types of transactions need to be documented. The trade bills are the
documents, generated against each transaction.
50) Define fair value accounting?
As per fair value accounting, a company has to show the value of all of its assets in
terms of price on balance sheet on which that asset can be sold.
51) Explain what is compound journal entry?
A compound journal entry is just like other accounting entry where there is more than
one debit, more than one credit, or more than one of both debits and credits. It is
essentially a combination of several simple journal entries.
52) What are the accounting events that are frequently involved in compound entries?
The accounting events that are frequently involved in compound entries are;

• Record multiple line items in a supplier invoice that address to different

expenses

• Record all bank deductions associated to a bank reconciliation

• Record all deduction and payments related to a payroll

• Record the account receivable and sales taxes related to a customer invoice
53) Mention the types of accounts involved in double entry book-keeping?
Double entry book-keeping involves five types of accounts,

• Income accounts

• Expense accounts

• Asset accounts

• Liability accounts

• Capital accounts
54) Mention what are the rules for debit and credit for different accounts to increase
the amount in your business accounts?
The rules for debit and credit for different accounts,

• for a capital account, you credit to increase it and debit to decrease it

 • for an asset account, you debit to increase it and credit to decrease it

• for a liability account, you credit to increase it and debit to decrease it

• for an expense account, you debit to increase it, and credit to decrease it

• for an income account, you credit to increase it and debit to decrease it

55) List out the Stages of Double Entry System?
• Recording of transactions in the journal

• Posting of journal entry in to the respective ledger accounts and then preparing a
trial balance

• Preparing final accounts and closing of books of accounts

56) Mention what is the disadvantage of double entry system?
The disadvantage of double entry system,

• If there is any compensatory errors, it is difficult to find out by this system

• This system needs more clerical labour

• It is difficult to find the errors if the errors are in the transactions recorded in the
books

• It is not preferable to disclose all the information of a transaction, which is not

properly recorded in the journal
57) Mention what is General ledger account?
The General ledger account is an account where the company records all the
information for its various expenses and income types into separate accounts. Such that
all the debits and credits pertaining to that particular type of transaction can be entered
in one place and kept balanced.
58) What is the general classification of accounts that usually ledger account involve?
The general classification of accounts that usually ledger account involves are

• Assets- Cash, Accounts Receivable

• Liabilities- Accounts Payable, Loans Payable

• Stockholders’ equity- Common Stock

• Operating revenues- Revenues through Sales

• Operating expenses- Rent Expense, Salaries Expense

 • Non-operating revenues and gains- Investment Income, gain on Disposal of
Equipment

• Non-operating revenues and losses- Interest Expense, Loss on Disposal of

Equipment
59) Mention what are things will not be included in bank reconciliation statement?
In a bank reconciliation statement, following thing can be excluded.

• Direct payments made by bank not entered in Cash book

• Cheques deposited but not cleared

• Cheques dishonoured not recorded in cash book

• Wrong debits given by bank

• Bank Charges or Interst debited by bank

• Banks direct payment not entered in Cash book

60) Under the accrual basis of accounting, when revenues are reported in the
accounting period?
When service or goods have been delivered, then revenues are reported in the
accounting period.
61) Under what type of account does the unearned revenues fall?
The unearned revenues falls under “Liability” account.
62) Mention whether the account “Cash” will be credited or debited, when a
company pays a bill?
The account “Cash” will be credited when a company pays a bill.
63) Mention what is assets minus liabilities?
Assets minus liabilities is equal to owners’ equity or stockholders equity.
64) Entries to revenues accounts such as Service Revenues are usually?
Entries to revenues accounts such as Service Revenues usually goes into credit side.
65) Explain what is the difference between accumulated depreciation and
depreciation expense?
The difference between accumulated depreciation and depreciation expense is that
 • Accumulated depreciation: It is the total amount of depreciation that has been
taken on a company’s assets up to the date of the balance sheet

• Depreciation expense: It is the amount of depreciation that is reported on the

income statement. Basically, it is the amount that corresponds only to the period
of time indicated in the heading of the income statement.
66) List out some of the examples for liability accounts?
Some of the examples for liability accounts

• Accounts Payable

• Accrued Expenses

• Short-term Loans Payable

• Unearned or Deferred Revenues

• Installment Loans Payable

• Current Portion of Long-term Debt

• Mortgage Loans Payable

67) Explain how you can adjust entries into account?
To adjust entries into account, you can sort entries into five categories.

• Accrued expenses: Expenses have been incurred but the vendors invoices are not
generated or processed yet

• Accrued revenues: Revenues have been earned but the sales invoices are not
generated or processed yet

• Deferred revenues: Money was received in advance of having been paid or

earned

• Deferred expenses: Money was paid for a future expense

• Depreciation expense: An asset purchased in one period must be allocated to

expense in each of the accounting periods of the asset’s useful life
68) Explain what a deferred asset is and give an example?
A deferred asset refers to a deferred debit or a deferred charge. An example of a
deferred charge is bond issue costs. These costs involves all of the fees or charges that
an organization incurs in order to register and issue bonds. This fees are paid in a near
time when the bonds are issued but it will not be expensed at that time.
69) Mention what is Bank Reconciliation?
A bank reconciliation is a process done by a company to ensure that the company’s
records (check register, balance sheet, general ledger account, etc.) are correct and that
the bank’s records are also correct.
70) Mention what is “deposit in transit”?
A deposit in transit is a checks and cash that have been received and recorded by an
entity, but which have not yet been entered in the records of the bank where the funds
are deposited.
71) Explain what is an over accrual?
An over accrual is a condition where the estimate for an accrual journal entry is too
high. This estimate may apply to an accrual of expense or revenue.
72) Mention what is account receivable?
A short term amounts due from buyers to a seller, who have purchased goods or
services from the seller on credit is referred as account receivable.
73) Explain what are the activities that includes in Cash Flow Statement?
The cash flow statement showcase the cash generated and used during the year or
months. Various activities that are involved for the Cash Flow are

• Operating activities – business activities accounting to cash

• Investing activities – sale and purchase of equipment or property

• Financial activities- purchase of stock and own bonds

• Supplemental information- exchange of significant items that don’t involve cash

74) Mention what happens to company’s “Cash Account” if it borrows money from
the bank by signing a note payable?
Due to double entry, the “cash account” will increase as such the liability account
increases.
75) Mention which account is responsible for interest payable?
Account which is responsible or affected by the interest payable is “Current liability
account”
76) Mention what is reversing journal entries?
Reversing journal entries are entries made at the beginning of an accounting period to
cancel out the adjusting journal entries made at the end of the previous accounting
period.
77) Mention where do generally accruals appear on the balance sheet?
Accrued expenses usually tend to be extremely short-term. So you would record them
within the “current liabilities section” of the balance sheet.
78) List out some of the accrued expenses and the accounts in which you would
record them?
• Wage accrual is entered with a credit to the “wages payable account”

• Interest accrual is entered with a credit to the “interest payable account”

• Payroll tax accrual is entered with a credit to the “payroll taxes payable account”
79) Deferred taxation is a part of which equity?
Deferred taxation is a part of owner’s equity.
80) Mention what does the investment of personal assets by the owner will do?
The investment of personal assets by the owner will increase total assets and increase
owner’s equity.
81) What is the equation for Acid-Test Ratio in accounting?
The equation for Acid-Test Ratio in accounting

• Acid-Test Ratio = (Current assets – Inventory) / Current Liabilities

82) List out things that fall under intangible asset?
Things that fall under intangible asset are,

• Patents

• Copyrights

• Trademarks

• Brand names

• Domain names, and so on.

83) Mention what is trial balance in accounting?
In accounting, trial balance is an accounting report that lists the balances in each of an
organization’s general ledger accounts. This is done at the end of posting journal entry
to ensure that there are no posting errors.
84) Where a cash discount should be recorded in journal entry?
A cash discount should be recorded in journal entry as a reduction of expense in “cash
account”.
85) Mention why some asset accounts have a credit balance?
Some asset accounts have a credit balance due to following reasons,

• Receiving and posting an amount that was higher than the recorded receivable

• Expenses occurred faster than the agreed upon prepayments

• An error caused by posting an amount to a wrong account

• The amount of checks written exceeded the positive amount in the Cash account

• Continuing to amortize or depreciate an asset after its balance has reached zero
86) Define what is Bad debt expense?
A Bad debt expense is the amount of an account receivable that is considered to NOT be
collectible.
87) Explain what is the Master Account?
A Master Account has subsidiary accounts. A master account receivable could be
anything, it could be account receivable for various individual receivable accounts.
88) Mention in which account does the unpresented cheque will get recorded?
The unpresented cheque will get recorded as a credit to the cash account in the
company’s General ledger.
89) What knowledge should financial accountant have?
A certified financial accountant should have knowledge about

• Accounting principles and practices

• Reporting and analysis of financial data

• Auditing practices and principles

• Account management

• Budgets
 • Software knowledge dealing with Accounting

• Knowledge of relevant laws, codes and regulations

90) What are the three factors that can affect your cash flow and business
profitability?
The three factors that can affect your cash flow and business profit includes

• Cash flows from investing activities: It includes shares, bonds, physical

property, machineries, etc.

• Cash flows from operating activities: It does not include cash received from
other sources like investments

• Cash flow from financing activities: It includes any activities that involves
dividend payments that the company made to its shareholders, any money that
includes stock to the public, any money borrowed from the lender etc. in other
words, it is a report that tells the firm about the money borrowed and paid out in
order to finance its activities.
91) Explain what is accrual accounting?
Accrual Accounting is a method for measuring the performance and position of the
company by identifying economic events regardless of when cash transaction
happened. In this method, revenue is compared with the expenditures, at the time in
which the transaction happens rather than when the payment is made.
92) Explain the term account payable?
Account payable is referred as the amount company owes to its suppliers, its
employees, and its partners. In other words, it is the basic cost levied on the company
to run business process that is outstanding. Account payable for one company may be
account receivable for another firm or company.
93) Explain the meaning of long-term notes payable is or long term liabilities?
Long-term notes payable or liabilities are referred for that loan that are not supposed to
due for more than a year. These are the loans from banks or financial institution that
are secured against various assets on the balance sheet, such as inventories.
94) Mention what is the difference between depreciation and amortization?
Capital expenses are either depreciated or amortized based upon the type of asset.

Depreciation Amortization
 • Depreciate means to lose value of an
asset due to their usage, wear and tear, • Amortize means to write off or pay
outdated, etc. the debt over a period of time.
Amortization can be for loans, or it can
• Depreciation cost is calculated in
be for Intangible assets
terms of tangible assets like furniture,
plant & machinery, building, etc. • Amortization cost is calculated in
terms of intangible assets like
• The purpose of calculating
goodwill, trademark, loans, patents,
depreciation costs recovery
etc.
• The easiest way to calculate
• The purpose of calculating
depreciation is to know the loss of
amortization is also for cost recovery
value of an asset over its life.
• Amortization calculates the amount
• For example, a car worth $30,000 has
spent after the intangible assets
estimated the lifetime of 10 years after
throughout the life for that asset
that it will have no value in the
market. The cost or loss in value • For example, Pharmaceutical
throughout this 10 years is known as Company spent $20 million dollars on
depreciation a drug patent with a useful life of 20
years. The amortization value for that
• Various method for depreciation
company will be $1 million each year
includes straight line depreciation,
declining balance method, group • Various method for amortization is
depreciation method, unit of negative amortization, zoning
time/production depreciation amortization, business amortization,
method, etc. etc.

95) Mention what does financial statement of the company includes?

Financial statement of the company includes various information like

• Balance Sheet ( Assets, liabilities, and equity)

• Income statement ( Profit or Loss statement)

• Equity statement

• Cash flow statement

96) Explain what is working capital?
Working capital is a financial metric that calculates the resources available to the
company to finance its day-to-day operations. It is typically calculated by deducting
current liabilities from current assets.
97) Explain what is ledger?
A ledger can be referred as an accounting book that keeps the record of journal entries
in a chronological order to individual accounts. The process of recording this journal
entries is known as posting.
98) Mention the types of ledger?
There are three types of ledger

• General ledger

• Debtors ledger

• Creditors ledger
99) Explain what is GAAP?
GAAP means Generally Accepted Accounting Principle; it is a framework of
accounting, standards, procedures & rules determined by the professional accounting
industry and practiced by publicly traded U.S companies all over the U.S.A.
100) Explain what is double-entry accounting? Explain with an example?
Double entry accounting is an accounting system that requires recording business
transaction or event in at least two accounts. It is the same concept of accounting,
where every debit account should be matched with a credit account.

For example, if a company takes a loan from a bank, it receives cash as an asset but at
the same time it creates a liability on a company. This single entry will affect both
accounts, the asset accounts, and the liabilities accounts, such entry is referred as
double entry accounting.
101) Explain what does the standard journal entry includes?
A standard journal entry includes, date of business transaction, name of the accounts
affected, amounts to be debited or credited and a brief description of the event.
102) Explain what is liabilities and what all does include in current liabilities?
Liability can be defined as an obligation towards another company or party. It may
consist of delivering goods, rendering services or paying money. They are the opposite
of assets, and it may include

• Account payable

• Interest and dividend payable

• Bonds payable
 • Consumer deposits

• Reserves for federal taxes

• Short term loans

103) Mention in simple terms what is the difference between Asset, equity, and
liabilities?
• Asset: What financial institute (bank) or people owe you

• Liabilities: It is something you owe people or organization

• Equity: It is something you own, for example, the amount of your house loan
you paid off
 21 Accountancy Interview Questions and Answers - Freshers, Experienced

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Explain each real account and nominal account with examples.

Real Account is an account of assets and Liabilities.

Types of Real account

o Furniture Account
o Land Account
o Machinery Account
o Building Account
o Goodwill Account
o Patents & Trade Marks Account.
Nominal Account is an account of incomes or expenses.
Types of Nominal account

o Salary Account,
o Commission Paid/Received Account,
o Telephone Expenses Account,
o Wages Account,
o Printing & Stationery Account,
o Interest Paid/Received Account.

What is the difference between mercantile system and cash system of accounting?

In mercantile system, expenses are considered as expenses during the period to which they pertain.
Similarly, incomes are considered to be incomes during the period to which they pertain. This
system of accounting is considered to be more ideal. On the hand, in cash system, expenses are
considered to be expenses only when they are paid for and the incomes are considered to be income
when they are actually received. This system of accounting is mainly used by the organizations
established not for earning the profits.
 What are the accounting concepts?

Accounting concepts are the basic assumptions on which the process of accounting is based.

Following are the accounting concepts

o Business Entity Concept

o Dual Aspect Concept
o Going Concern Concept
o Accounting Period Concept
o Cost Concept
o Money Measurement Concept
o Matching Concept

What is owner’s equity? How will you calculate it?

Owner’s equity, also known as capital of the business is the claim of the owner of the business
against the assets of the business. Owner’s equity is calculated by subtracting equity of creditors
from the total equity.

What is double entry Bookkeeping? What are its rules?

Double entry bookkeeping follows the principle according to which every debit has a
corresponding credit; hence total of all debits is always equal to the total of all credits. In this
system, one account is debited and at the same time another account is credited by the similar
amount.

Following are the rules for different account

For Personal Accounts : Debit the receiver, Credit the giver.

For Real Account : Debit what comes in, Credit what goes out.
For Nominal Account : Debit all the expenses, Credit all the incomes.
 What is bank reconciliation statement? What are the steps to prepare it?

Bank reconciliation statement is a statement prepared at periodical intervals, with a view to

indicated the items which cause disagreement between the balances as per the bank columns of the
cash book and the bank pass book on any given date.

Follow the below steps to prepare a bank reconciliation statement

o Take the balance either as per cash book or as per pass book as a starting point.
o Compare the items appearing in the bank column of the cash book with the item appearing in the
bank pass book.
o Tick off the items in the pass book with the entries in the cash book. A list of unticked items either
in cash book or pass book will be found.
o Add or deduct items from the balance which has been taken as a starting point.
o The resultant figure will be the balance as shown by the pass book or vice versa.

What are the reasons for the difference in the balances as shown by the cash book and the pass
book?

o Cheques deposited into the bank but not yet collected and credited.
o Cheques issued but not yet presented for payment.
o Bank Charges.
o Amount collected or credited by bank on standing instructions.
o Amount paid or debited by the bank on standing instructions.
o Interest credited by bank.
o Interest debited by bank on overdraft.
o Direct payment by customers into the bank account.
o Dishonour of cheques or bills.
o Errors in recording of transactions by either the firm or the bank.

What is the adjustment entries made while preparing the final accounts from the Trial Balance?

o Closing Stock
o Depreciation
o Outstanding Expenses
o Prepaid Expenses
o Accrued Income
o Income received in advance
o Bad Debits
o Provision for Doubtful Debts
o Provision for Discount on Debtors
o Interest on Capital
o Drawings
o Deferred Revenue Expenditure Written off
o Abnormal Loss due to fire etc.
o Goods distributed as free samples
o Goods sent on approval basis
o Commission payable to the manager

What is debit note and credit note? What is the difference between them?

Debit note is an intimation sent to a person dealing with the business that his account is being
debited for the purpose indicated therein. It is a note made out with a carbon duplicate. The original
one is sent to the party to whom the goods are returned and the duplicate copy is kept for office
record.
Credit note is an intimation sent to a person dealing with the business that his account is being
credited for the purpose indicated therein.

What is the difference between Cash discount and Trade discount?

o Cash discount is an allowance made by retailers to the customers for prompt payment. On the
other hand, trade discount is an allowance made by the wholesaler dealer to retailers off the
catalogue or invoice price. This allowance is made between purchasers and sellers engaged in the
same class of trade.
o Cash discount is always allowed or received when payment is made. Trade discount enables the
retailers to sell the products to customers at catalogue or price list issued by the wholesaler.
o Cash discount is an allowance in addition to the trade discount made by the seller to the buyer.
o Cash discount is recorded in account books while trade discount is not shown separately.
o The main purpose of allowing trade discount is to enable the retailers to sell the goods at list price
while the purpose of providing cash discount is prompt payment by the debtor to the creditor.

What items are included in Profit and Loss account?

o Salaries
o Rent
o Rates and Taxes
o Interest
o Commission
o Trade Expenses
o Printing and Stationery
o Advertisement
o Carriage out, freight out, carriage out
o Repairs
o Travelling expenses
o Samples
o Depreciation
o Apprentice premium
o Life insurance premium
o Insurance premium
o Income tax
o Interest on capital and drawings
o Loss or gain on asset sold
o Discount received and allowed
o Trade discount

What is the difference between a trial balance and a balance sheet?

o Trial balance is a list of balances from the ledger account while balance sheet is a statement of
assets and liabilities.
o Trial balance contains balances of all personal, real and nominal accounts, while balance sheet
contains balances of only those personal and real accounts which represent assets and liabilities.
o Trial balance is prepared before preparation of trading and profit and loss account, while balance
sheet is prepared after the preparation of trading and profit and loss account.
o Trial balance is prepared to check the arithmetical accuracy of posting into ledger while balance
sheet is prepared to indicate the financial position of the business on a particular date.
o Debt and credit balances are shown side by side while balance sheet is prepared on a T form basis,
the left hand side showing liabilities while right hand side representing assets.
o Closing stock does not appear in the trial balance while it is shown on the assets side of balance
sheet.

What is Contingent Liabilities?

Contingent liability is an obligation, relating to a past transaction or other event or condition, that
may arise in consequence, as a future event now deemed possible but not probable. Thus such
liabilities as may arise in future are called contingent liabilities. For example: guarantee to a bank
for loan advanced to a third party, possible penalties, fines and penalties payable to the government
or income tax authorities etc. Future losses from natural calamities are not contingent liabilities.
They are not recorded in books of account. They do not appear on the liabilities side of the balance
sheet. They are shown by way of a footnote at the bottom of the balance sheet.

Explain convention of materiality?

This convention proposes that while accounting for the various transactions, only those transactions
will be considered which have material impact on profitability or financial status of the
organization and other insignificant transactions will be ignore. In keeping with the principle of
materiality, unimportant items are either let out or merged with other items. Sometimes, such items
are shown as footnotes or in parentheses according to their relative importance.

What are the important terms used in balance sheet?

Assets

o Current assets and fixed assets

o Tangible assets and Intangible assets
 Equity is a claim which can be enforced against the assets of the firm in the court. Thus equity refers
to a claim held by

o An owner only,
o A creditor only,
o An owner and the creditor both.
Liability

o Current Liability
o Long term Liability or fixed Liabilities
o Contingent Liabilities

What is Deferred Revenue Expenditure? Give some examples.

Deferred Revenue Expenditure is a type of expenditure which does not result into the acquisition of
any fixed asset and the benefits from such expenditure is not received during the period which they
are paid for.
For example - Initial Advertisement Expenditure, Research and development Expenditure,
Preliminary Expenses.

Define Trial Balance. What are the main characteristics and uses of a trial balance?

Trial balance is a list of all balances standing on the ledger accounts of a firm at any given time.

Following are the main characteristics of a trial balance.

o It is a statement prepared in a tabular form.

o It has two columns: one for debit balances and another for credit balances.
o Closing balances as shown by ledger accounts are shown in the statement.
o It is not an account but only a statement of balances.
o It is prepared on the basis of balanced accounts.
o It is a method of verifying the arithmetical accuracy of entries made in the ledger.
o It helps in preparation of Trading account, Profit & Loss account and Balance Sheet at the end of
the period which exhibit the financial position of the firm.
 What are the common errors in accounting? What steps will you follow to locate errors?

Following are the common errors in accounting:

o Errors of Omission
o Errors of Commission
o Errors of Principle
o Compensating Error
To locate the errors in the trial balance follow the below steps:

o Check the total of all the subsidiary books, cash book and trial balance.
o Ensure that all the opening balances have been correctly brought forward in the current year’s
books of account.
o Ensure that all the ledger accounts have been properly balanced and the balances of all the ledger
accounts have been reflected in the Trial Balance.
o The difference in trial balance should be halved to locate such errors.
o If the difference in the trial balance is divisible by 9 without any reminder, it may indicate the
transposition or transplacement of the amounts.
o The trial balance of the current year can be compared with the trial balance of the previous year to
locate certain highlighting error.

What is the relation between journal and ledger?

o The journal is the book of first entry whereas the ledger is the book of second entry.
o The journal as a book of source entry ordinarily has greater weight as legal evidence than the
ledger.
o The journal is the book for chronological record whereas the ledger is the book for analytical
record.
o The unit of classification of data within the journal is the transaction; in the ledger the unit of
classification of data within the ledger is the account.
o The process of recording in the journal is called journalizing, the process of recording in the ledger
is called posting.
 List down the errors which affect Trial Balance and errors which do not affect Trial Balance.

Errors which affect the agreement of trial balance:

o Wrong totaling of subsidiary books.

o Posting on the wrong side of an account
o Omission of posting an amount in the ledger
o Posting of wrong amount
o Error in balancing
Errors which do not affect the agreement of trial balance:

o Error of Principle
o Errors of Omission
o Errors of Commission
o Recording of wrong amount in the books of prime entry or subsidiary books.
o Compensating Errors.
1. What are the different branches of accounting?
2. What is the difference between cost accounting, financial accounting and managerial accounting?
3. What is the difference between book keeping and accounting?
4. What are the important terms which are used in accounting?
5. What is personal account, real account and nominal account?
6. Explain dual aspect concept in accounting?
7. What is the difference between mercantile system and accrual system of accounting?
8. What are bills receivable and bills payable?
9. What are the accounting concepts? Explain each of them.
10. What are the accounting principles?
11. What is owner’s equity? How will you calculate it?
12. What are the rules of Debit and Credit?
13. What do you understand by the term assets and liabilities?
14. What is double entry book keeping?
15. What is bank reconciliation statement? What are the steps to calculate it?
16. What is overhead in accounting terms?
17. What is the difference between cash flow and fund flow statements?
18. What is debit note and credit note? What is the difference between them?
19. What are the golden rules of accounting?
20. What is an adjusting journal entry?
21. What is deferred account?
22. Explain Accounting 101?
23. What are accounting entities?
24. What is the Provision? What is the Entry for Provision?
25. What is the Importance of accounting standards?
26. What are the functions of accounting?
27. What is Contingent Liabilities?
28. Why Accounting is important in business?
29. What are the four classifications of Bad and Doubtful Debts as per the context of the Bank?
30. What is an operative accounts?
31. What is the difference between Accounts and Finance?
32. What is FBT (Fringe Benefit Tax)?
33. What is the relationship between bookkeeping and accounting?
34. Why does the accounting equation have to balance?
35. What is the difference between accounting and bookkeeping?
36. What is accounting period?
37. What is an accounting loss?
38. What is an EA in accounting?
39. What is the software applications used for accounts receivable?
40. What is inventory management?
41. What do you mean by Working Capital?
42. Define "book value" as applied to accounting?
43. What are the basic assumptions in accounting?
44. What is accounting normalization?
45. What are the various items fall under balance sheet?
46. What is the difference between cash basis and accrual basis balance sheet?
47. How do you pass a journal entry for purchase order in books of account?
48. What do you understand by Contingent liability?
49. How to prepare funds flow statement?
50. What is gross profit margin?
51. What is accounting report?
52. What are the different kinds of MIS reports?
 53. What is meant by appropriation?
54. What do you understand by inter company settlement?
55. What is the meaning of TDS? How it is charged?

Common Finance Interview Questions (and Answers)

The WSP Blog > IB Interview Tips

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With the start of a new academic year, we know

that finance interviews are again at the forefront of many of your minds. Over the next
few months, we’ll be publishing most frequently asked technical finance interview
questions and answers across a variety of topics – accounting (in this issue), valuation,
corporate finance – to get you prepared.

Before we get to accounting questions, here are some interview best practices to keep in
mind when getting ready for the big day.
 1. Be prepared for technical questions. Many students erroneously believe that if
they are not finance/business majors, then technical questions do not apply to
them. On the contrary, interviewers want to be assured that students going into
the field are committed to the work they’ll be doing for the next few years,
especially as many finance firms will devote considerable resources to mentor
and develop their new employees.

2. One recruiter we’ve spoken to said “while we do not expect liberal arts majors to
have a deep mastery of highly technical concepts, we do expect them to
understand the basic accounting and finance concepts as they relate to
investment banking. Someone who can’t answer basic questions like ‘walk me
through a DCF’ has not sufficiently prepared for the interview, in my opinion”.

3. Another added, “Once a knowledge gap is identified, it’s typically very difficult
to reverse the direction of the interview.”

4. Keep each of your answers limited to 2 minutes. Longer answers may lose an
interviewer, while giving them additional ammunition to go after you with more
complicated question on the same topic.

5. It’s ok to say “I don’t know” a few times during the interview. If interviewers
think that you’re making up answers, they’ll continue probing you further,
which will lead to more creative answers, which will lead to more complicated
questions and a slow realization by you that interviewer knows that you don’t
really know. This will be followed by uncomfortable silence. And no job offer.

Now, on to Accounting Questions

Accounting is the language of business, so don’t underestimate the importance of

accounting questions. Some are easy, some are more challenging, but of all of them
allow interviewers to gauge your knowledge level without the need to ask more
complex valuation/finance questions.Below we have selected most common accounting
questions you should expect to see during the recruiting process.
Q: Why do capital expenditures increase assets (PP&E), while other cash outflows, like
paying salary, taxes, etc., do not create any asset, and instead instantly create an
expense on the income statement that reduces equity via retained earnings?

A: Capital expenditures are capitalized because of the timing of their estimated benefits
– the lemonade stand will benefit the firm for many years. The employees’ work, on the
other hand, benefits the period in which the wages are generated only and should be
expensed then. This is what differentiates an asset from an expense.

Q: Walk me through a cash flow statement.

A. Start with net income, go line by line through major adjustments (depreciation,
changes in working capital and deferred taxes) to arrive at cash flows from operating
activities.

• Mention capital expenditures, asset sales, purchase of intangible assets, and

purchase/sale of investment securities to arrive at cash flow from investing
activities.

• Mention repurchase/issuance of debt and equity and paying out dividends to

arrive at cash flow from financing activities.

• Adding cash flows from operations, cash flows from investments, and cash flows
from financing gets you to total change of cash.

• Beginning-of-period cash balance plus change in cash allows you to arrive at

end-of-period cash balance.

Q: What is working capital?

A: Working capital is defined as current assets minus current liabilities; it tells the
financial statement user how much cash is tied up in the business through items such as
receivables and inventories and also how much cash is going to be needed to pay off
short term obligations in the next 12 months.
Q: Is it possible for a company to show positive cash flows but be in grave trouble?

A: Absolutely. Two examples involve unsustainable improvements in working capital

(a company is selling off inventory and delaying payables), and another example
involves lack of revenues going forward.in the pipeline

Q: How is it possible for a company to show positive net income but go bankrupt?

A: Two examples include deterioration of working capital (i.e. increasing accounts

receivable, lowering accounts payable), and financial shenanigans.

Q: I buy a piece of equipment, walk me through the impact on the 3 financial

statements.

A: Initially, there is no impact (income statement); cash goes down, while PP&E goes up
(balance sheet), and the purchase of PP&E is a cash outflow (cash flow statement)

Over the life of the asset: depreciation reduces net income (income statement); PP&E
goes down by depreciation, while retained earnings go down (balance sheet); and
depreciation is added back (because it is a non-cash expense that reduced net income) in
the cash from operations section (cash flow statement).

Q: Why are increases in accounts receivable a cash reduction on the cash

flow statement?

A: Since our cash flow statement starts with net income, an increase in accounts
receivable is an adjustment to net income to reflect the fact that the company never
actually received those funds.

Q: How is the income statement linked to the balance sheet?

A: Net income flows into retained earnings.

Q: What is goodwill?

A: Goodwill is an asset that captures excess of the purchase price over fair market value
of an acquired business. Let’s walk through the following example: Acquirer buys
Target for $500m in cash. Target has 1 asset: PPE with book value of $100, debt of $50m,
and equity of $50m = book value (A-L) of $50m.

• Acquirer records cash decline of $500 to finance acquisition

• Acquirer’s PP&E increases by $100m
• Acquirer’s debt increases by $50m
• Acquirer records goodwill of $450m

Q: What is a deferred tax liability and why might one be created?

A: Deferred tax liability is a tax expense amount reported on a company’s income

statement that is not actually paid to the IRS in that time period, but is expected to be
paid in the future. It arises because when a company actually pays less in taxes to the
IRS than they show as an expense on their income statement in a reporting period.

Differences in depreciation expense between book reporting (GAAP) and IRS reporting
can lead to differences in income between the two, which ultimately leads to differences
in tax expense reported in the financial statements and taxes payable to the IRS.

Q: What is a deferred tax asset and why might one be created?

A: Deferred tax asset arises when a company actually pays more in taxes to the IRS than
they show as an expense on their income statement in a reporting period.

• Differences in revenue recognition, expense recognition (such as warranty

expense), and net operating losses (NOLs) can create deferred tax assets.

I hope you enjoyed this article. Please feel free to write me with any comments or
recommendations